The dollar index, which measures the greenback against six counterparts, eased 0.15% to 108.47, but remained not far from its highest since September 2002 at 109.29, touched in mid-July.
Investors have been bracing for the Fed to double down on its commitment to crushing inflation at its annual gathering in Jackson Hole, Wyoming.
Money markets have pared back expectations that the U.S. central bank could tilt to a slower pace of rate hikes following a chorus of hawkish Fed commentary in recent weeks, and currently lay 60.5% odds on another super-sized 75 basis-point rate hike next month versus 39.5% probability of a half point increase.
"Expectations of a hawkish message from FOMC Chair Powell at Jackson Hole will likely keep upward pressure on the USD," Commonwealth Bank of Australia analyst Kristina Clifton wrote in a client note.
"However there is a risk that the speech is deemed not hawkish enough and that we see some retracement in the USD."
The dollar retreated 0.25% to 136.775 yen, but remained not too far from this week's one-month high of 137.705.
The euro edged 0.14% higher to $0.99825, after sliding to a 20-year low of $0.99005 on Tuesday.
The single currency has been hurt by growth concerns as the region faces an energy crisis, with investors on edge before Russia halts gas supplies through the main Nord Stream 1 pipeline for three days from Wednesday for unscheduled maintenance.
Sterling gained 0.17% to $1.18105, after dipping to the lowest since March 2020 on Tuesday at $1.1718.
The Australian dollar gained 0.19% to $0.6920, up from a more than one-month low of $0.6856 earlier in the week.
New Zealand's kiwi lagged its Antipodean peer with a 0.06% rise to $0.6194, hampered by data showing a decline in retail sales. It was at a one-month low of $0.6157 on Monday.
(Reporting by Kevin Buckland; Editing by Christopher Cushing)
By Kevin Buckland
